Monday’s Stock Watch

  • July 17, 2003
  • Chris Tyler

 

The
highlight of the week for the bulls came early, as Monday proved to be a pivot
high for all three of the ETFs. Unfortunately, within our ‘confirmed
rally’, the rest of the week, up through Thursday’s trade, has witnessed some
Institutional distribution. Both the Diamonds (DIA) and the Spyders (SPY) have
notched two straight days of selling pressure, while the market leading Q’s (QQQ),
has registered one day of distribution thus far.

As measured by a series of higher
highs, and higher lows, the ‘confirmed rally’ is still intact, believe it or
not. But, as always, it’s never a good time to let one’s guard down, especially
in light of some the deteriorating technical evidence. While we are in an
uptrend, only the NASDAQ has been able to make a fresh relative, and 52-Week
high before the first indications of Institutional selling pressure became
evident this week off of our pivot highs. The other market proxies have put in
lower highs, showing what might be the first technical clues that the four month
long rally may be changing in character. Price and volume matter, bottom-line.
With the distribution count triggering this week we have to at least be on guard
at this point in time, as five or more such days during a two week consolidation
period is our first real indication that a new trend might be underway.

For most, the July 1st lows will be
the definitive ‘line drawn in the sand’ for the bullish case. Personally, with
my emphasis on taking profits as the market provides them to us, and through the
use of trailing stops, I tend to gravitate towards a bit of a more creative
approach using a blend of trendline analysis, percentage pullback/fibonacci
retracements, as well as what the current environment is for our leading growth
stocks. In my humble analysis, I’m looking towards the May 20th/21st pivot lows
as the technical uptrend supports for both the Diamonds and Spyders. This is
roughly a 10% pullback for both these market proxies, and between the 38 to 50%
Fibonacci supports from the March lows. For the stronger Q’s, I’m looking
towards the July 1st lows as the technical case for the uptrend to remain
intact. This level also approximates a 10% pullback from its highs, and is
confirmed by the 38% Fibonacci support.

I’ve said it before, and it sure
‘bears’ repeating as we enter Friday’s trade, and that is, ‘boy what a
difference a week can make.’ Unfortunately, even though our market uptrend
levels are still intact, regardless of how you measure them, quite a few growth
stocks have made some significant pullbacks, and some have breached technical
supports that now make them base building candidates, rather than breakout
qualifiers. Our own list of growth stocks has managed to steer clear of any
casualties, but there have been some strong percentage pullbacks off of recent
highs in some of these issues. Remember to take heed in your position management
as we enter an area of critical importance to many Institutional investors. If
the market sees more, or possibly even one more day of evident distribution, it
could spell trouble, rather than pullback in our select group of stocks.

Mark Boucher’s Top
RS and ER List is for the first time, in quite some time, roughly on par
with the Bottom
RS and ER list, confirming our belief that if nothing else, it pays to be on
guard when the market is sending mixed signals. You can always get back in after
more solid patterns take shape, which, if the market is going to remain healthy,
will be our invitation to take on quality positions that will lead the market in
the next leg up. At the moment, the sectors are also showing conflicting
signals. The Biotechs
(
BBH |
Quote |
Chart |
News |
PowerRating), Retailers
(
RTH |
Quote |
Chart |
News |
PowerRating), and Semiconductors
(
SMH |
Quote |
Chart |
News |
PowerRating)
are consolidating out of fresh highs, but some other recent leaders such as the
Internet
(
HHH |
Quote |
Chart |
News |
PowerRating), Software
(
SWH |
Quote |
Chart |
News |
PowerRating), and Networking (NWX) sectors are showing
some technical wear and tear as they break various levels of support, but are
still holding their technical uptrends. And finally, the once well-built
Homebuilders (HGX) are testing their July 1st pivot lows, and should be
monitored closely for further position management in case today’s consolidation
work becomes the start of tomorrow’s downtrend.

Even in ‘confirmed rallies’, there
will be casualties from time to time, especially when action like that which we
have seen this week takes place. That’s why our rules are always in place, so we
can limit the losses to an acceptable risk, and  continue to look for the
next outsized gain. On that note, until we see otherwise, in both our individual
names, as well as our ETF friends, we will continue to look for stocks setting
up in a healthy market environment. Although we could describe this week’s trade
as ‘teetering’ on healthy market action, we do in fact have more potential trade
opportunities for which to consider, if the market shall be kind enough once
more, to support our cause of positioning ourselves in today’s leading stocks.

 

  NYSE NASDAQ
Advancing
Issues		  699 617
Declining
Issues		 2122 2432
Total
Volume		 1.6b 1.9b
New
52-week Highs		 54 122
New
52-week Lows		 24 7

 

New Category:

Swing Trade Setups: Potential
position plays that are expected to last 2 to 7 trading days, using key
technical levels for entry. These stocks do not necessarily meet all of our
stringent Intermediate Term requirements, but are demonstrating many of the same
strong criteria. Due diligence on the individual traders part is an absolute
requirement!!! Proper money management rules are emphasized in scaling out of
profitable positions, as is, the setting of prudent stop losses, on the
establishment of any positions taken. The list is not maintained on a weekly
basis as trades are considered, at time of entry, short term in nature.

None Today.

Company
Name		 Symbol 12
Month RS		 Price Pivot
+.10		 Technical
Perspective
Emulex
(
ELX |
Quote |
Chart |
News |
PowerRating)		 23 21.57 26.74 7-Month
basing pattern
Manhattan
(
MANH |
Quote |
Chart |
News |
PowerRating)		 69 29.08 30.94 potential
daily cup and handle one month
Take
Two Interactive
(
TTWO |
Quote |
Chart |
News |
PowerRating)		 71 28.58 31.50 8-Month
Cup & Handle
Veritas
(
VRTS |
Quote |
Chart |
News |
PowerRating)		 73 27.65 30.50 6-week
basing pattern
C.H.Robinson
(
CHRW |
Quote |
Chart |
News |
PowerRating)		 39 37.41 38.16 Daily
2-month Cup and Handle
Able
Labs
(
ABRX |
Quote |
Chart |
News |
PowerRating)		 94 22.28 23.85 Daily
one-month cup and handle pattern
Iron
Mountain
(
IRM |
Quote |
Chart |
News |
PowerRating)		 49 38.81 40.29 Downsloping
weekly consolidation pattern
Lexmark
(
LXK |
Quote |
Chart |
News |
PowerRating)		 58 75.07 77.99 2-month
high level base with one week handle
Lowes
(
LOW |
Quote |
Chart |
News |
PowerRating)		 39 46.64 48.15 2-month
high level “W” with handle on daily

 

Watch List Action:

As always, the search goes on for top stocks meeting our fundamental and
technical criteria. Stocks forming bases or handles are monitored, and put on
our watchlist, and then moved to our position list of recent breakouts, on price
triggers above resistance pivots.

 

Stocks Building A Base

Company
Name		 Symbol 12
Month RS		 Price Technical
condition		 Average
Volume		 Pivot
             

                       

Stocks Forming A Handle

Company
Name		 Symbol 12
Month RS		 Price Technical
condition		 Average
Volume		 Pivot
             

       

 

Recent Breakouts

We monitor the action of Recent Breakouts as an
indicator of the market health for IT traders. When breakouts are acting well,
this is a good sign for the likelihood of further sustainable breakouts. When
breakouts are failing, IT traders should be even more cautious. 

    

Company
Name		 Symbol 12
Month RS		 Price Average
Volume-65 Day		 Pivot 52-Week
High
Apollo
Group
(
APOL |
Quote |
Chart |
News |
PowerRating)		 72 62.67 2,085M 46.89 67.30
Career
Education 
(
CECO |
Quote |
Chart |
News |
PowerRating)		 83 73.21 774K 54.40 78.98
Coach
Inc.
(
COH |
Quote |
Chart |
News |
PowerRating)		 82 52.73 1,015M 28.35 56.86
Boston
Scientific
(
BSX |
Quote |
Chart |
News |
PowerRating)		 82 56.66 3,529M 47.65 65.73
International
Game Technology
(
IGT |
Quote |
Chart |
News |
PowerRating)		 78 26.04 1,174M 18.71 27.11
UCBH
Holdings
(
UCBH |
Quote |
Chart |
News |
PowerRating)		 68 30.56 356K 22.60 31.50
Corinthian
Colleges
(
COCO |
Quote |
Chart |
News |
PowerRating)		 70 51.15 759K 43.09 52.83
Nextel
(
NXTL |
Quote |
Chart |
News |
PowerRating)		 95 18.80 23,929M 15.85 20.53

Breakouts that may
require extra diligence. Those issues that are near pivot entries or 15%
or more, from established highs.

This list accounts for those issues that have performed strongly, but may
require position management due to deteriorating technical condition before
pivot price is reached. If an issue pullbacks 30% or more from highs, the stock
will be removed from our lT lists, so we can make room for more compelling trade
candidates.

Company
Name		 Symbol 12
Month RS		 Price Average
Volume-65 Day		 Pivot 52-Week
High
 Gtech
Holdings
(
GTK |
Quote |
Chart |
News |
PowerRating)		 69 38.66 640K 37.05 40.70
Garmin
Ltd.
(
GRMN |
Quote |
Chart |
News |
PowerRating)		 75 39.75 816K 23.46 51.70
New
Century Financial
(
NCEN |
Quote |
Chart |
News |
PowerRating)		 67 26.12 971K   34.07
Endo
Pharmaceutical
(
ENDP |
Quote |
Chart |
News |
PowerRating)		 80 15.74 927K 14.98 19.45
Digital
River
(
DRIV |
Quote |
Chart |
News |
PowerRating)		 88 20.85 1,300M 20.20 26.37
Hovnanian
(
HOV |
Quote |
Chart |
News |
PowerRating)		 81 53.75 1,105M 40.90 70.50
Centex
(
CTX |
Quote |
Chart |
News |
PowerRating)		 67 73.97 1,425M 59.80 87.50

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